Microsoft, Amazon cloud earnings to test $200B AI spending thesis

Microsoft Corp. and Amazon.com Inc. report quarterly results this week, with cloud computing revenue and AI capital spending set to determine whether the sector's $200 billion infrastructure buildout is paying off.

"The cloud acceleration we're seeing is real, but the market wants proof that spending translates to earnings," said Daniel Ives, managing director at Wedbush Securities.

Amazon's cloud unit grew 28% year-over-year in the first quarter to $37.6 billion, its fastest pace in 15 quarters. Microsoft's Azure business, which posted 33% growth in the March quarter, faces similar scrutiny when it reports fiscal fourth-quarter results on Wednesday. Wall Street expects Microsoft revenue of $87.63 billion and earnings per share of $4.24, according to LSEG estimates. Amazon, reporting Thursday, is forecast to post revenue of $196.4 billion and EPS of $1.82.

The stakes extend beyond a single quarter. Amazon plans roughly $200 billion in capital expenditures in 2026, mostly for AI infrastructure, while Microsoft's spending is on a similar trajectory. Alphabet raised its own 2026 capex forecast to a midpoint of $200 billion when it reported last week, sending its shares down 8% as investors focused on the cash burn. Amazon's trailing 12-month free cash flow fell to $1.2 billion from $25.9 billion a year earlier, driven by a $59.3 billion jump in capital spending.

Amazon shares have fallen 16% from their 52-week high of $278.56, even as the average analyst price target sits at roughly $313, implying 34% upside. The stock closed Friday at $231.39. Microsoft shares have held up better, supported by its established cloud business and Copilot adoption.

For Amazon, the key metric is whether AWS can sustain its acceleration. The unit grew 20% in the third quarter of 2025, 24% in the fourth quarter and 28% in the first quarter of 2026 — three straight quarters of rising momentum. For Microsoft, Azure growth and commentary on AI monetization will dominate the earnings call, along with updates on Copilot seat adoption and the company's OpenAI partnership.

The guidance raises from both companies signal management expects AI demand to accelerate further. Investors will watch the post-earnings calls on Wednesday and Thursday for updated segment margins and capex timelines.

This article is for informational purposes only and does not constitute investment advice.